Thai PM says China pledges to buy 1 mln tonnes of rice a year

Thai PM says China pledges to buy 1 mln tonnes of rice a year

BANGKOK - Thai Prime Minister Yingluck Shinawatra said on Sunday China would support plans by domestic companies to buy a million tonnes of rice a year from Thailand for an indefinite period, against an earlier pledge to take the same volume over 5 years.

Thailand is under pressure to move record rice stockpiles amassed in a populist grain-buying scheme designed to support farmers. It has announced a series of sales to several countries, many of which have denied taking Thai rice.

"The Chinese government had agreed to buy 1 million tonnes of rice in 5 years," Yingluck told reporters after a meeting with Chinese Premier Li Keqiang in Bangkok. "Today, they agreed to adjust the number to 1 million tonnes a year."

The comments came on the last day of Li's three-day visit to Thailand. The Thai commerce ministry will study details of the plan, which is expected to begin this year, Yingluck said, adding that a time frame for the deal had not yet been fixed.

There was no official comment from the Chinese side.

On Friday Li said China would buy one million tonnes of Thai rice over the next five years but made no mention of government deals. He said purchases would be from private firms, making no mention of 1.2 million tonnes the Thai government said last month was sold to China in a government-to-government deal.

China's state-owned trading house, COFCO Co. Ltd, signed a memorandum of understanding with Thai private firms in Bangkok on Friday.

Deals would be done on a case-by-case basis between China's trading house and Thai firms "at market prices", said Cookiat Ophaswongse, an honorary president of the Thai Rice Exporters Association.

Traders said the pact was unlikely to have a major impact on the global rice market.

Thailand has built up huge stockpiles because of a controversial intervention scheme the government has run since October 2011 to buy rice from farmers at prices well above the market. The intervention price of US$480 (S$598.07) per tonne of unmilled rice translates to US$750 a tonne for milled rice, making Thai rice uncompetitive in the global market.

Scheme opponents say it is riddled with corruption and has led to the smuggling of rice from neighbouring countries to take advantage of the high prices on offer. Moody's rating agency has warned about the damage to the state budget.

The scheme, which has cost Thailand its title as the world's biggest rice exporter, will add about 10 million tonnes by year-end to existing stocks, unless the government can sell down the stocks.

Thailand now sits on rice stockpiles of 16 million tonnes, more than double last year's exports and around 40 per cent of the annual global trade of 38 million tonnes.

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